Good News. Great Future?

IT unemployment is at its lowest level in years, but long-term concerns still remain.

By Eric Chabrow and Marianne Kolbasuk McGee, InformationWeek
April 11, 2005
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=160503550

Back in 1999, calling yourself a Java programmer was a license to print money, and Marty Trujillo was happy to collect. But the freelance coder had a lot less luck last year, working about 60% of the time at rates well below what he used to make.

This year, he expected to get two or three weeks off after finishing a contract project at his last employer. "But there was no break. I ended the last job on Friday and started the new one on Monday," says Trujillo, who was placed at his new gig at Automatic Data Processing Inc. by IT staffing firm Anteo Group LLC. The biggest kicker: His pay rates are much higher than a year ago.

Trujillo's experience is reflected in the fact that IT unemployment figures are at their lowest level since early 2001--offering the latest data point in a confusing and often contradictory picture of the health of the job and career outlook for IT professionals.

Unemployment among IT workers averaged 3.7% for the four quarters ended March 31, according to InformationWeek's analysis of the latest data from the U.S. Bureau of Labor Statistics. Average IT unemployment for the same four-quarter period a year earlier hit a post-boom high of 5.5%.

Steve Novak has seen the effect as CIO of Kirkland & Ellis, a 1,000-attorney law firm with about 130 full-time, part-time, and contract IT staff. Two years ago, a posting on a job board would generate 300 resumés, many of them not fitting the qualifications, Novak says. Today, a posting gets about a dozen resumés.

Novak hopes the recent uptick is a sign of equilibrium returning to the IT field after a tech boom and bust, and that it will lure people back to the profession. As his IT team sorts through the options for giving lawyers the mobility to work anywhere around the world, he finds the pace of change and complexity of technology choices among the most challenging he has seen in two decades in IT. "The biggest concern I have is people will no longer view IT as a long-term career path," Novak says. "Two years ago, with all the downsizing, that was a leap of faith."

It still takes some faith. The immediate employment picture may have improved, but long-term worries about competition with low-cost countries and job losses from automation and outsourcing are well founded. And while recent hiring may have people moving into--or returning to--IT careers, the workforce is far from where it was a few years ago.

The IT workforce, which covers people employed or seeking IT work, averaged 3.5 million for the four quarters ended in March. That's about 37,000 more than at the end of 2002, when the workforce bottomed out. The dark side to that: More than 100,000 Americans dropped out of the IT labor force in late 2001 and 2002, and almost 70% haven't returned.

For many of the unemployed, it will be a struggle to find positions, especially if companies take the same hiring approach as Virtual Care Provider Inc. The company, which provides IT services to nursing homes and other long-term care facilities, has been hiring several IT pros a month for six months. But Virtual Care Provider is only hiring people with four-year college degrees, and it looks for other formal training such as certification and credentials. The company's approach leaves some people out of the running, says Loren Claypool, VP and managing director. He believes that's true in the larger job market as well. "The person who's self-educated, kind of the jack-of-all-trades, is getting squeezed," Claypool says. For the highly qualified, however, Claypool believes there might be a bit more confidence in the job market, as seen by Virtual Care Provider's ability to recruit a few people to leave jobs at larger, established companies in the Milwaukee area and take a chance at an emerging company that's profitable but only a few years old.

IT unemployment historically had been considerably lower than overall joblessness--as much as 3 percentage points lower in the mid- to late 1990s. Scott Brown, chief economist of securities broker Raymond James & Associates, doesn't expect such a large chasm to return, but he believes IT employment will outperform overall employment in the near future as businesses increase IT spending and hire professionals to develop and deploy new technology.

Recruiters have seen the short-term boost just since last summer. There has been significant improvement in the demand for software developers in recent months, particularly for senior Java pros, says Dion DeLoof, president of Anteo. As recently as last summer, programmers regularly faced two months of downtime between assignments. Anteo recently had 30 Java programmers finish a project, and each had at least two interviews for new jobs waiting, he says. Pay is moving up from an average of $40 to $45 an hour early last year to about $55 an hour, he says. DeLoof's biggest surprise is the number of requests for temporary workers where employers' goals are to bring those people on full time.

After a number of false starts in recent years, this is the first stretch of several months of sustained hiring, says Kevin Knaul, executive VP of the IT and telecommunications practice group at Hudson, a staffing and outsourcing company. Companies are "spending more on IT talent to tackle IT projects" that had been shelved or delayed for several years, Knaul says.

Of eight major IT job categories the Bureau of Labor Statistics tracks, unemployment has been lowest among database administrators (1.8%) and network and system administrators (2.9%) on average over the past four quarters. Network and data-communication analysts fared the worst (5.2%), followed by support specialists (4.5%) and programmers (4.1%). The number of unemployed IT pros for the 12 months ended March 31 stood at 131,000, the lowest since third-quarter 2001, when it was 112,500. Still, some of what feels like an improvement is just relative to how tight hiring had become. Companies have been working with skeleton staffs the past few years, so some of the hiring is just "playing catch-up," Knaul says.

But it's certainly a changed environment when a contract programmer like Trujillo, whose job will continue to be among the most threatened by offshore price competition, feels optimistic that some companies see the difficulty in outsourcing. "They can't outsource some portions of the [development] process," he says, so they're hiring to get it done.

IT pros know they haven't seen the last of uncertainty and global competition. They just hope new jobs at good pay aren't a fleeting phenomenon.

-- With Chris Murphy

Photo courtesy of Getty Images